MF Global clients may lose as much as $700 million after trustees battle KPMG over the funds.

James Giddens, trustee of the company, is “prepared to use all legal avenues available to him in recovering the customer funds, including litigation,” according to Giddens’ spokesman Kent Jarrell. If successful, that $700 million would lower KPMG’s client money pool and reduce its customers’ returns. However, if Giddens fails in his appeal, KPMG would keep the money and American customers would have to wait for a payout as they would be considered unsecured creditors.

KPMG has already been forced to set aside the funds until the dispute is resolved, and the Big4 firm disagrees with Giddens, whose position is that “these funds were segregated for U.S. customers who traded on foreign exchanges and, thus, should be returned to those customers,” according to Jarrell.

On January 9th, KPMG reiterated its position that MF Global clients are unsecured creditors at a meeting of creditors. The firm is set to begin returning money to clients in February, after a hearing is scheduled in London on the status of account holders’ money.

KPMG has earned $27 million in fees on the MF Global administration and has yet to return any funds to MF Global clients. KPMG has said that it “does not agree” with the trustee’s claim on $700 million of the client money pool, ”but [we] will continue to work constructively with his team to bring about an early resolution of the matter,” according to a statement by KPMG administrator Richard Heis.

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